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It’s likely that insured losses in Texas from Winter Storm Uri, which overwhelmed the state in mid-February, will climb into the $10 billion to $20 billion range, according to catastrophe modelers and insurance industry market analysts.

Losses from Uri may be “somewhat comparable to those from Hurricane Harvey, which was a Category 4 hurricane that made landfall on Texas and Louisiana in August 2017,” according to S&P Global ratings. The market intelligence organization said in a Feb. 26 media release, however, that it was still “too early to accurately quantify the insured losses given the complexity of the event.”

Catastrophe modelling agency Karen Clark & Co. has estimated insured losses from the storm at around $18 billion. Hurricane Harvey caused about $19 billion in insured losses in Texas and $30 billion across the U.S., S&P Global noted.

AIR Worldwide said industry insured losses in Texas “appear likely to exceed $10 billion” and estimated “average claims severity values of $15,000 for residential risks and $30,000 for commercial risks.” The catastrophe risk modeling firm added, however, that the $10 billion figure could rise significantly due to a number of factors. Those factors could include “a higher than expected rate of claims among those risks affected by prolonged power outage, whether utility service interruption coverages pay out, larger than expected impacts from demand surge, government intervention, and whether claims from mold damage start to emerge as a significant source of loss.”

In an article published by Bloomberg, Chuck Watson, a disaster modeler for Enki Research, estimated that losses from the extended freeze and power outages in Texas could reach $90 billion, with around $20 billion of those losses covered by insurance.

Winter storm Uri left millions in Texas without power for days, and extreme low temperatures froze pipes, causing them to burst. Many locations experienced their longest-ever, continuous recorded freeze, according to AIR, “with Waco as an example of one Texas city staying below freezing for 203 consecutive hours — 53 more than the previous record. At the peak of the low temperatures, on February 15, the average temperature across Texas was just 12° Fahrenheit, or 6° lower than the average temperature in Alaska on the same day.”

In a report issued on Feb. 19, “Potential Record Catastrophe Losses for Texas Insurers Due to Winter Storm Uri,” AM Best said it expects the heaviest volumes of claims stemming from Uri to come from “the homeowners, commercial property, and auto lines of business.” The ratings agency also warned that a “significant” loss contributor will be the “surge in demand for contractors and construction materials.”

In addition to property damage outside residential structures from snow and ice, claims will arise from water damage and flooding in building interiors resulting from frozen and broken water pipes. “Depending on policy coverage terms, homeowners insurers may also be on the hook for hotel costs and additional living expenses for families that need shelter while their homes are uninhabitable due to cold temperatures,” AM Best said.

The same types of property damage experienced by residential structures will plague commercial property as well. Plus, commercial claims likely will arise from businesses that suffered losses due to the power outages, AM Best said. “Extended power outages could create losses not only for primary insurers but reinsurers as well,” AM Best added.

Additionally, due to the “heightened perils of traveling on slick, icy Texas streets, roads, and highways, personal auto insurers in Texas and other states will also likely face significant increases in claims from a spike in accidents,” the ratings agency noted.

The Texas Department of Insurance on Feb. 26 issued a data call to insurers for information on claims stemming from the severe winter storm that impacted the state Feb. 11 – 19. March 31 is the due date for the first report for data as of Feb. 28. Subsequent reports are due monthly, at the end of each month, TDI said.

Topics Texas Profit Loss Windstorm